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Major upheaval of water abstraction system will create winners and losers

Defra has unveiled a package of proposed reforms that will overhaul the current system for water abstraction licences in England, including permits linked to usage, more storage on farms and a trading system.

The proposals signal the end the current abstraction licence system, set up in the 1960’s, which Defra said was ‘no longer flexible or modern enough to respond to pressures on the environment, farming and other business requirements’.

The key elements of the reform include new permits with abstraction limits reflecting a farm’s likely water usage, moves to make it easier for farmers to store water and a system enabling abstractors to trade water more easily at times of low supplies.

In the consultation document Defra said: “We want to reform how water abstraction is regulated, revealing the value of water, to help businesses to respond better to short term low flows as well as enable a focus on long term investment and growth.

“We want to ensure all abstractors can access the water they need for their businesses and that there is enough water left in our rivers and groundwater to maintain habitats and water quality.”

Winners and losers

CLA head of land use policy Damian Testa said it was critical the reformed system enabled farm businesses to maintain certainty and security of supply to abstract the water they need to produce food.

“There are likely to be winners and losers from the proposed new system,” he said.

We welcome the ability to store bonus water in water-scarce catchments when flows are high, and the removal of seasonal restrictions.

“However if unused licence volumes are removed or restrictions imposed based on average usage, farmers will be hit hard.

“Not only could this damage food production, but also limit the possibility of the expansion of their businesses, affect capital values and leave jobs at risk too.”

Commenting on the proposed new water shares system in water-scarce catchments, he warned it could see farms priced out the market, with commercial implications for primary producers supplying supermarkets.

Major upheaval

NFU national specialist for water resources Paul Hammett said the proposals signalled a ‘major upheaval’ to the current abstraction licensing system.

“It’s absolutely vital they deliver a fair share of water to help our farmers and growers produce affordable, high quality food,” he said.

“The reform package must be underpinned by measures that encourage more surplus river water to be stored by helping farmers to construct more reservoirs, including by offering tax incentives.

“Secure access to water at times of drought is crucial for our members and we will continue to focus on the Defra’s plans for managing water at low river flows.”

He said welcomed the proposed abolition of section 57 restrictions that currently apply uniquely to farmers and growers.

“However abstractors will still be subject to more general restrictions during times of low river flows and we will continue to press for ‘Water for Food’ to be recognised as a high priority use during times of shortage,” he said.

"The challenge facing the agri-food sector lies in ensuring that producers are given a fair allocation of water for food production when existing licences are transferred to new permits,” he said.

He said NFU would seek to ensure government policy and legislation moves at a ’measured pace’ over the next few years to allow farming businesses sufficient time to adjust and invest in water security and efficiency measures.

What the water abstraction reforms will entail

From the early 2020s replacement abstraction permits will be issued with permitted volumes that at least reflect current business use. Abstractors’ past peak water usage over at least 10 years will be considered including dry years.

‘Paper water’ (licensed abstraction volumes that have not been used) will be removed, subject to appeal, if they pose a risk to the environment.

The new permits will allow abstractors to take water at any time when flows are high so they can store it for when flows are low, including making better use of reservoirs. There will be no seasonal permits.

Abstractors will be able to trade water in a quicker and easier way in catchments where there are potential benefits. There will be a range of pre-approved trades, so permit holders can trade more easily at times when water availability is low.

In these catchments, surface water abstractors will be given shares of the catchment’s different water resources which will facilitate pre-approval of upstream trades. This will give abstractors more flexibility, helping them to cope during low flows and reveal the value of water to underpin decisionmaking.

Defra, with Ofwat, will work with interested parties to consider whether there are any mechanisms, such as codes of practice, required to address concerns from smaller abstractors such as farmers about market dominance by larger abstractors.

All abstractors directly affecting surface water will have conditions on their permits that enable flow based controls to protect the environment. Those currently without flow-based controls will have new conditions on their permits.

Defra will keep the impacts of markets under review to guard against unintended consequences such as impacts on food security.

No permits will be time limited. Defra will take a risk-based catchment approach to permit reviews and said it would consider all permits on a level playing field.

It will publish catchment data and information so abstractors and others can understand the environmental risks in their catchment and the likelihood of a review being triggered.

There will be reasonable notice given of potential permit changes to give abstractors time to adapt. There will be no compensation for permit changes.

The Welsh Government will publish a separate response document to the consultation on the reforms setting out its proposals for handling the reforms in Wales. Defra said shared a joint vision for the future of the abstraction management system with the Welsh Government.